Missed the Deadline? Three New Tax Court Rulings Address Timing in Partnership Audit Disputes

Since 2018, most partnerships have been audited under a centralized IRS audit system created by the Bipartisan Budget Act of 2015 (BBA). Under the BBA, the IRS deals with the partnership through a single partnership representative, and any resulting tax can be collected from the partnership rather than from the individual partners. The process ends with an IRS notice called a Notice of Final Partnership Adjustment (FPA). The partnership then has 90 days to file a petition in the U.S. Tax Court.

Recently, the Tax Court published three opinions explaining how the BBA deadlines work. Two of the opinions favor taxpayers, holding that missing the 90-day court deadline is no longer automatically fatal. The third favors the IRS, holding that an agreement to extend the audit period also gives the IRS more time to issue its final notice.

Big Apple Tompkins Realty LLC v. Commissioner, 167 T.C. No. 7 (August 5, 2026)

What Happened: The IRS mailed an FPA in August 2022. The partnership said it never saw the notice until November 2023 and filed in the Tax Court roughly 452 days after mailing, well past the 90-day deadline. The IRS asked the court to throw the case out, arguing the court had no jurisdiction to hear a late-filed case.

What the Court Decided: The court agreed that the IRS had properly mailed the notice and the petition was late. In reaching this conclusion, the court also held for the first time that the 90-day BBA deadline is not jurisdictional. Instead, it is an ordinary procedural deadline. The court pointed out that the U.S. Congress used the words "jurisdictional requirement" elsewhere in the same statute but not for the 90-day deadline.

The court also distinguished the BBA from the older partnership audit regime – the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) – whose deadlines were held to be jurisdictional in North Wall Holdings LLC v. Commissioner, 165 T.C. 143 (2025). Though TEFRA "impose[d] a highly detailed and technical regime consisting of coordinated deadlines … that would fail to function were equitable tolling applied," the BBA does not. The court left open whether a late filing could be excused.

Why It Matters: A missed deadline no longer automatically closes the courthouse door because "equitable tolling" may be applied to extend non-jurisdictional deadlines.

Kings Road Property LLC v. Commissioner, 167 T.C. No. 11 (September 21, 2026)

What Happened: After receiving the IRS' proposed adjustments, the partnership's new counsel calculated the latest date the IRS could issue an FPA and monitored the mail for it. When no notice arrived, counsel obtained an IRS account transcript and called the IRS. The IRS told her no notices had been sent, and the transcript did not reflect that an FPA has been issued or that additional tax had been determined. Although the FPA was not received, the partnership filed a protective petition in the Tax Court based on counsel's calculation of the 90-day deadline from the latest date the IRS could issue the FPA.

In fact, the IRS had mailed the FPA nearly a month before its deadline. Each copy mailed to the partnership and the partnership representative was returned to the IRS as undeliverable and no copy was sent to the new counsel, even though the IRS had processed her power of attorney (Form 2848) before the FPA was issued. The partnership's protective petition ended up being filed 16 days late. More than $11 million in tax, plus penalties, was at stake.

What the Court Decided: The Tax Court answered the question left open in Big Apple Tompkins Realty. It held that the 90-day deadline can be extended for fairness reasons under a doctrine called "equitable tolling." To qualify, a partnership must show 1) that it pursued its rights diligently and 2) that extraordinary circumstances beyond its control prevented a timely filing. Kings Road Property met both tests because of the undelivered mail, the IRS' misinformation and counsel's proactive follow-up. The court treated the petition as timely. It also stressed that returned mail alone would not be enough and that tolling is applied "sparingly."

Why It Matters: Kings Road Property is the first case to actually save a late-filed BBA Tax Court petition. However, the outcome rested on documented diligence. Partnerships that simply wait for mail will likely not get the same result. The court also noted that it has not decided whether other BBA deadlines can be extended in the same way.

Katanga Properties LLC v. Commissioner, 167 T.C. No. 10 (September 9, 2026)

What Happened: The partnership extended the IRS' audit period to May 30, 2025. The IRS issued its Notice of Proposed Partnership Adjustment (NOPPA) in April 2024 and its FPA on March 25, 2025. The partnership argued that the extension applied to the NOPPA only. On that view, the IRS had just 330 days after the NOPPA to issue the FPA, which would have meant a March 12, 2025, deadline.

What the Court Decided: The court ruled in favor of the IRS. The statute allows adjustments until the latest of several alternative deadlines. A signed extension pushes out the general deadline, including the time to issue the FPA. The court also clarified that the IRS is not barred from issuing an FPA after day 330 if the limitations period remains open.

Why It Matters: Signing a statute extension has broader consequences than some taxpayers had argued. Statute-of-limitations defenses based on the 330-day rule will generally fail when an extension is in place.

Practical Takeaways

• Calendar From the Earliest Possible Date: Do not assume the IRS will wait until its last day. In Kings Road Property, the FPA was mailed nearly a month before the IRS' deadline.
• Keep Addresses and Representatives Current: Notices are valid when they are mailed to the last known address, even if they are never received. Update the partnership representative's address and file current powers of attorney promptly.
• Document Diligence: Pull IRS transcripts, call the IRS, keep notes of the calls and consider filing a protective petition. This record is what saved Kings Road Property.
• Late Is Still Risky: Equitable tolling is a narrow safety valve, not a new deadline. File within 90 days whenever possible.
• Read Extensions Carefully: Before signing a statute extension, understand that after Katanga Properties the extension likely covers the IRS' final notice, as well as the proposed notice.
• Watch for Appeals: The IRS has asked the Tax Court to reconsider its rulings in Big Apple Tompkins Realty and Kings Road Property. Future appellate decisions or congressional action could alter the developing landscape, and the IRS is likely to vigorously contest taxpayer tolling arguments.

For more information or questions, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.